Is Cryptocurrency under threat in India?

The recent crypto pop and drop did make a lot of hype among the Indian youngsters to get into the blockchain world, but the shadow of RBI and its affiliated banks seems to be raining on the parade. Before we go into the depth of whether crypto is good or bad for people and the country, it is important to state that this blog is not providing any financial advice and it is always better to consult an advisor before investing.

In Internet and Mobile Association of India v. Reserve Bank of India, the Hon'ble Supreme Court of India vide its judgment dated 4th of May, 2020, noted that cryptocurrency is capable of being accepted as valid payment for the purchase of goods and services, and payment systems can be regulated by the RBI. So where is the agitation? 

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As of late, few major banking institutions have stopped transactions with the Exchange platforms causing a FUD in the market. The Apex Court though has clearly quashed the RBI circular by the aforesaid judgment yet these banking institutions are putting up their old circulars in defence of these arbitrary moves.

The Crypto-currencies which are made on blockchain platforms aim towards flawless peer to peer transactions without the hindrance of any third-party institutions. The contention here is that firstly, as the blockchain system does not allow any third party to detect the exact id of the trader, tracking of records of such transactions shall not be possible, leading to illegal activities. And secondly, the market is too volatile as it is not backed by any asset or institution.

In defence of the above contention, Bitcoin, being pseudonymous, does not store real-world data thus tracing a transaction might not be directly possible, tracking the identity of the person would require a DCE platform as completing KYC is mandated on these platforms. Thus any person intending any illegal activity can be traced out. In that regard, having regulated Exchange Platforms in the country would be a solution rather than banning these revolutionary assets altogether. 

Just like gold is used as a hedge against inflation of currencies, bitcoin acts as a hedge but the only factor that drives the prices of bitcoin or other alternate(alt) coins is the investors' willingness and belief in its value. As bitcoin is still in its early ages and not "as old as gold" thus understanding and educating ourselves more about these concepts can make a huge difference. Bitcoin or any other altcoins are not an easy money-making asset and they like stocks have projects and a specific path. It is also to be noted that just like gold whose supply is limited, bitcoin, too, is limited and the maximum supply of it can be easily traced to 21 million which has been calculated to be reached by the year 2150.

The concept of digital currency could drastically reduce the cost of printing paper currency. Thus the country can benefit largely by accepting cryptocurrencies as an asset class, though it still might not be right to allow the same as legal tender. The complete banning of private cryptos was being proposed to be brought in the new budget session through Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, but the same got cancelled and the government is considering regularising the crypto assets as a whole.

It is also under consideration that a government regularised crypto asset backed by Indian Currency might be introduced in the market which can be a way to step towards a true Digital India. Would we as a nation be able to accept technology and be the first Asian Country to have taken the path of digitization of currency is a thing the youngsters of the country are waiting to see?